World HSBC's profits plunge 45% as low interest rates and bad loans take their toll

12:17  23 february  2021
12:17  23 february  2021 Source:   businessinsider.com.au

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HONG KONG/LONDON (REUTERS) - HSBC Holdings' first-quarter profit nearly halved from a year-ago, missing estimates, after boosting provisions against bad loans as the coronavirus pandemic hits borrowers worldwide.. The bleak outlook, shared by many lenders reporting earnings this season, underscored the scale of the problems facing the sector as it grapples with corporate borrowers in crisis, plunging stock and oil prices, as well as low interest rates . HSBC ’ s new chief executive officer Noel Quinn faces additional hurdles as plans to cut costs through layoffs - part of a wider restructuring

HSBC has said it will axe around 35,000 jobs as it announced profits for 2019 fell by about a third. That has spurred the bank to target $ 4 . 5 bn (£3.5bn) of cost cuts by 2022 as part of a major restructuring. The bank's interim chief executive, Noel Quinn, said HSBC would scale back its headcount from 235,000 to about 200,000 over the next three years. Asia now accounts for about half of HSBC ' s revenue and 90% of profits . The bank is also facing the impact of the coronavirus, the UK's protracted withdrawal from the European Union and historically low interest rates around the world.

a man holding a sign: HSBC. HSBC.
  • HSBC posted a 45% decline in profits to $US12.1 billion in 2020.
  • The bank earned $US12.8 billion in Asia, but lost $US4.2 billion in Europe.
  • HSBC earned lower profits in three of its four divisions.
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HSBC posted a 14% slump in adjusted revenue last quarter, as rock-bottom interest rates weighed on its operations. Combined with a 60% surge in credit-impairment charges to $US1.2 billion due to significant economic uncertainty in the UK, the result was a 50% plunge in adjusted pre-tax profits to $US2.2 billion.

Europe's biggest bank suffered an 8% drop in adjusted revenue for the full year, and a 45% decline in adjusted pre-tax profits to $US12.1 billion. Moreover, its credit-impairment charges surged by about 226% to $US8.8 billion.

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HSBC ' s profits have plunged by 65 per cent in the first half of the year due to the coronavirus as Europe's largest bank plans to slash 35,000 jobs worldwide. The bank has endured a torrid year on the markets with the London listed shares falling more than 40 per cent from 595p to 342p as of June 30. Group chief executive Noel Quinn said: 'Our first half performance was impacted by the Covid-19 pandemic, falling interest rates , increased geopolitical risk and heightened levels of market volatility.'

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"In 2020, our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance sheet and liquidity gave reassurance to those who rely on us," CEO Noel Quinn said in the earnings release.

"We achieved this while delivering a solid financial performance in the context of the pandemic â€" particularly in Asia â€" and laying firm foundations for our future growth. "

Indeed, HSBC earned $US12.8 billion in adjusted pre-tax profits from its Asia operations last year, which offset a $US4.2 billion loss in Europe.

Three of the bank's four segments generated less income in 2020. Adjusted pre-tax profits tumbled 53% in the wealth and personal-banking division, 74% plunge in the commercial-banking division, and 7% in the global banking and markets segment.

HSBC shares were last down 1.7% on London's FTSE 100 index on Tuesday, ranking them among the worst performers out of the major European banks.

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